Jack Bogle, the founder of index fund giant Vanguard Group, is warning investors to prepare for 2019 by decreasing exposure to stocks and increasing investment in defensive strategies, such as fixed income securities like bonds.
“Trees don’t grow to the sky, and I see clouds on the horizon. I don’t know if and when they’ll arrive. A little extra caution should be the watchword,” Bogle said, speaking in an interview with Barron’s published this weekend. “If you were comfortable at a 70 percent to 30 percent [allocation to stocks and fixed income], under these circumstances you’d like to go back to 60 percent to 40 percent, or something like that.”
Bogle does not believe investors for the long term should try to pull completely out and time the market, which he says is “a really dumb strategy.” Instead, Bogle says it’s time “to really be thinking how much risk you want to have” and make some defensive moves.
“If I had a big liability in a year, I’d get prepared for it right now,” Bogle added.
Even before this quarter’s extreme stock market volatility, Bogle told CNBC in April he’s never seen volatility like this in his 66-year career. The S&P 500 is set to end 2018 down by about 6 percent after a 14 percent drop in the final three months.
Vanguard now has more than $5 trillion under management.
Read the full Barron’s story here.